Is £17,647 too little for care homes in crisis?

25th July 2016

Care home debt pileThere has been lots of scaremongering in the care industry press about levels of debt and the ability to make any sort of reasonable return from care homes. Recent BBC research suggests an average profit before tax of just £17647 for care home operators. Is it worth all the trouble?

The research suggests that 25% of care homes in the UK are at risk of going to the wall within three years. That’s 5000 of the 20,000 care homes in the UK. In 2015 just 72 care homes went out of business.

With an ageing population care home operators need to find better ways of balancing the books. A £4bn industry debt pile means that some operators may start to see some care homes as an unattractive investment, but not those who have fundamentally refocussed their efforts on ensuring they understand and control costs.

The complexity of the finance issue continues to be compounded by the mismatch between local authority funding and private care costs, made worse this year by the introduction of the National Living Wage.

But some care homes operators are making their way, sharpening the pencil on costs whilst maintaining the critical pathway of social care provision. Outsourcing support services, such as payroll, is seen as a key tool to staying profitable, since outsourcing gives a level of business flexibility that cannot easily be achieved with internal resources.

Reviewing procedures and processes can also yield improvements in operational performance. And a fundamental understanding of the make-up of care home staffing is critical to ensure no waste. This is not about chopping jobs, or putting lives at risk. It’s about utilising the full range of part-time, full time, zero hours etc. effectively.

Care Home operators cannot wait for the Department of Health to catch up and fund local authority places appropriately. And with the implications of Brexit still yet to be fully understood they need to get on top of costs now.